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International International: How Google could end up selling TV inventory
As part of deal with CBS, web giant might assume control of local ad space

International: How Google could end up selling TV inventory
As part of deal with CBS, web giant might assume control of local ad space

Author | exchange4media News Service | Wednesday, Jan 17,2007 9:13 AM

International: How Google could end up selling TV inventory<br>As part of deal with CBS, web giant might assume control of local ad space

Google and CBS have spent the last year getting to know one another, and clearly have found that each has something the other can use. Which is why the worst-kept secret in the media world at the moment is the deal the two are negotiating and expect to finalize very soon. That's not surprising-but CBS allowing the search giant entry into the $68 billion U.S. TV advertising business would be.

The two have held serious talks during the past several weeks, with a radio agreement all but sewn up, and are in heavy negotiation for other content and inventory deals. Under the deal, Google would offer CBS revenue guarantees for content licensing and the reselling of traditional media inventory. Those close to the talks said negotiations have included CBS making local TV spots available for Google to resell.

Both Google and CBS declined to comment.

The inevitable

Whether local TV spots are included in this pact, or a future one, observers believe Google experimenting with selling TV is inevitable.

"Google is poised to be a major player in national ad markets in all media," said Barry Parr, analyst at Jupiter Research. "They've learned some things about self-service ad sales that will be useful to them in other markets." And he believes the struggles of local markets -- thanks to consolidation of advertisers, competition from the internet and competition with non-media marketing tactics such as direct mail -- will provide an opening for a player like Google.

That Google has learned to adopt new sales methods to compete in other markets signals a level of adaptability that is unusual for a large internet company, he said. For example, the newspaper-ad-sales system allows for human decisions at multiple levels and stages.

"That's a big concession from a company like Google, which tries to do everything algorithmically," he said.

Google's underlying principles

One of Google's underlying principles is relevance -- and that's clearly an area of opportunity in TV, said Kevin Lee, CEO of Did-It Search Marketing. He said he's been watching diaper ads for years, but it was only within the last 10 months since his daughter was born that he's actually had need for them.

"This is why I think Google will get into TV -- it is possible through targeting to increase relevance," he said. "And that means marketers can pay more for that efficiency, and that's good for consumers, publishers and marketers."

Sounds good in principle, but traditional TV buyers aren't convinced Google getting into the game would provide a buying solution for local TV inventory, outside of direct-response and remnant buying. It's unlikely such a service would bring smaller advertisers to TV -- one of Google's promises as it partners with traditional media sellers -- given the production costs of TV creative and the frequency with which ads need to run to be considered effective. "There's already a natural barrier for smaller advertisers," said Jim Gaither, director-broadcast, Richards Group.

And there are other companies Google would probably need to partner with or absorb into its TV efforts to make such an endeavor work, such as Spot Runner, which provides low-cost creative to smaller marketers using stock video footage, or Visible World, which can change creative on the fly to react to changes in weather and inventory and target by zip code or channel to increase an ad's relevancy.

The ungoogle

One company that is getting into automated local-TV-inventory sales is SoftWave Media Exchange. The company's selling point to media partners is, essentially, that it's not Google. ("We've got radio and TV in our DNA," said Chief Operating Officer Bill Fingenshu.) But the only pushback they've had from advertisers using their automated system is "getting folks to migrate from the old school sending the beta tape in [as creative]," said Christian Kitchell, exec VP-strategy. Still, they admit cash-rich Google can offer something many traditional media companies need right now: revenue guarantees.

Jessica Reif Cohen, an analyst with Merrill Lynch, issued a note last week and said if the CBS-Google pact included 10% of CBS Radio's advertising time, that portion of the deal could involve about $200 million in revenue. She also suggests it could lead to the disintermediation of traditional advertising buyers over time.

Indeed, a deal with CBS will help boost its struggling radio and, possibly, local TV ad sales divisions. CBS Radio revenue is down 7% through the first three quarters of 2006, and local TV is expected to face difficult comparisons in 2007, since it got a boost last year from the 2006 elections. Contrary to many assumptions, the deal wouldn't be just for remnant inventory, and would be instrumental in helping Google get its audio-advertising business off the ground.

Source: Adage

Tags: e4m

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